Companies like Ethos going public at a valuation significantly lower than their last private round represent a strategic capitulation. It shows investors have given up hope of regaining peak valuations and prefer to "clear the logjam" by providing liquidity, even if it's at a loss.
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Navan's post-IPO stock drop, despite strong revenue, is a troubling sign for the venture ecosystem. It highlights that even a multi-billion-dollar outcome can be considered a 'bummer' and may not generate sufficient returns for large, late-stage funds, resetting expectations for what constitutes a truly successful exit in the current market.
Discord filed for an IPO, but its current valuation of $7-8B is significantly lower than its 2021 peak of $15B and the $10-12B Microsoft acquisition offer it rejected. This illustrates the market's impact on high-flying private valuations and the risk of turning down acquisitions.
While massive, oversubscribed follow-on financings for companies with positive data indicate renewed investor appetite, the true market recovery hinges on the IPO window reopening. Analysts remain deeply divided on whether 2026 will see a significant number of IPOs, suggesting a fragile recovery.
The traditional IPO exit is being replaced by a perpetual secondary market for elite private companies. This new paradigm provides liquidity for investors and employees without the high costs and regulatory burdens of going public. This shift fundamentally alters the venture capital lifecycle, enabling longer private holding periods.
An IPO at a valuation that's flat compared to the last private round suggests the company is distressed. It implies the private markets are tapped out and the company is being forced to go public out of a desperate need for capital, rather than from a position of strength.
In the current market, companies prioritize liquidity and public market access over protecting previous private valuations. A lower IPO price is no longer seen as a failure but as a necessary market correction to move forward and ensure survival.
Despite initial excitement, the market's enthusiasm for IPOs has cooled significantly. Many newly public tech companies, including high-quality ones like Figma, are trading well below their peaks or even their IPO price, indicating the floodgates for public exits have not truly reopened.
The current IPO market is bifurcated. Investors are unenthusiastic about solid, VC-backed companies in the $5-$15B valuation range, leading to poor post-IPO performance. However, there is immense pent-up demand for a handful of mega-private companies like SpaceX and OpenAI.
Companies like SpaceX and OpenAI command massive private valuations partly because access to their shares is scarce. An IPO removes this barrier, making the stock universally available. This loss of scarcity value can lead to a valuation decline, a pattern seen in other assets like crypto when they became easily accessible via ETFs.
Many long-standing tech companies are going public not because they are strong businesses, but because their venture capital investors need a liquidity event after 15-20 years. Public market investors should be wary of these IPOs, as the underlying companies are often 'dead in the water' with historically poor post-IPO stock performance.